AUE3701 OCTOBER 2016 EXAM SOLUTION

AUE3701 EXAM SOLUTIONS OCTOBER 2016 QUESTION 1 ( a & b ) • GROUP ANNUAL FINANCIAL STATEMENTS TO BEPREPARED • THE RISK THAT THE AFS MAY BE MATERIALLY MISSTATED AS ERRORS COULD OCCUR DURING CONSOLIDATION AS THE PROCESSIS COMPLEX • THE RISK THAT THE AFS MAY BE MATERIALLY MISSTATED AS INTERCOMPANY TRANSACTIONS MAY NOT BE ELIMINATED • THE RISK THAT THE AFS MAY BE MATERIALLY MISSTATED AS RELATED PARTYTRANSACTIONS MAY NOTBE PROPERLY ACCOUNTED FOR AS PER REQUIREMENTS • THE RISK THAT THE AFS MAY BE MATERIALLYMISSTATEDASRELATED PARTY TRANSACTIONS AND RELATIONSHIPS MAY NOTBEATARMS LENGTH • THE RISK THAT THE AFS MAY BE MATERIALLY MISSTATED AS THE BUSINESSCOMBINATIONDURINGTHE PERIODANDASTHISTRANSACTIONIS COMPLEX ERRORS COULD OCCUR IN THE RECORDING THEREOF • NEW AUDIT CLIENT • THE RISK THAT THE AFS ARE MATERIALLY MISSTATED AS THE OPENING BALANCES COULD CONTAIN MISSTATEMENTS AS WE WERE NOT THE AUDITORS IN THE PREVIOUS YEAR • DIRECTORSTORECEIVESHARE OPTIONS • CEO IS ASHAREHOLDER • THE RISK OF THE AFS BEING MATERIALLY MISSTATED AS THE DIRECTORSMAYMANIPULATETHE RESULTS BY OVERSTATING INCOMES AND UNDERSTATING EXPENSES IN ORDER TO INCREASE EARNING PER SHARE TO ENSURE THAT THEIRSHARE OPTIONS VEST • SELLING MAGAZINES TO INTERNATIONAL COUNTRIES • THE RISK THAT THE AFS ARE MATERIALLY MISSTATED AS FOREIGN EXCHANGE LAWS OR REGUALTIONS MAY NOT BE FOLLOWED OR COMPLIED WITH • LACK OF GOOD CORPORATE GOVERNANCE PRINCIPLES • NOINDEPENDENT DIRECTORS • THE RISK OF THE AFS BEING MATERIALLY MISSTATED AS THE CONTROL ENVIRONMENT MAY BE This study source was downloaded by from CourseH on :29:44 GMT -06:00 This study resource was shared via CourseH WEAKERDUETOMANAGEMENTTHAT LACK INTEGRITY RESULTING IN MISSTATEMENTS IN THE AFS • FINANCING APPLICATIONIS • THE RISK OF THE AFS BEING DEPENDENT ON AUDITED AFS OF MATERIALLYMISSTATEDASTHEENTITY PUBLISHING 4U MAY MANIPULATETHEAFSINORDER TOENSURETHATTHEYRECEIVETHE FINANCING FROM THE BANK • THEREISA RISKTHATTHEAUDITOR COULDBEHELDLIABLETOTHEBANK DUE TO THEM RELYING ON THE AUDITED STATEMENTS WHEN DECIDING WHETHER TO PROVIDE FINANCING OR NOT